Question 1

Athena Company provides employee health insurance that costs $5,000 per month.In addition,the company contributes an amount equal to 5% of the employees' $120,000 gross salary to a retirement program.The entry to record the accrued benefits for the month would include a:

Accepted Answer

Accrued Expenses = ($120,000 * 0.05) + $5,000 = $11,000

Question 2

On April 12,Hong Company agrees to accept a 60-day,10%,$4,500 note from Indigo Company to extend the due date on an overdue account.What is the journal entry needed to record the transaction by Indigo Company?

Accepted Answer

Indigo Company is the one recording the transaction, as they are the ones issuing the note. They would debit the Accounts Payable account to reduce the balance owed to Hong Company, and credit the Notes Payable account to record the new liability created by the note. Therefore, the correct journal entry is Debit Accounts Payable $4,500; credit Notes Payable $4,500.

Question 3

During the first week of January,an employee works 46 hours.For this company,workers earn 150% of their regular rate for hours in excess of 40 per week.Her pay rate is $16 per hour,and her wages are subject to no deductions other than FICA Social Security,FICA Medicare,and federal income taxes.The tax rate for Social Security is 6.2% of the first $118,500 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings.The current FUTA tax rate is 0.6%,and the SUTA tax rate is 5.4%.Both unemployment taxes are applied to the first $7,000 of an employee's pay.The employee has $80 in federal income taxes withheld.
-What is the amount of this employee's gross pay for the first week of January?

Accepted Answer

The employee's gross pay is calculated as follows: 40 hours at her regular rate of $16 per hour equals $640. For the 6 hours of overtime, she earns 150% of her regular rate, which is $24 per hour (1.5 x $16). Thus, for 6 hours, she earns $144 (6 x $24). Her total gross pay for the week is $640 + $144 = $784.

Question 4

Cantrell Company is required by law to collect and remit sales taxes to the state.If Cantrell has $8,000 of cash sales that are subject to an 8% sales tax,what is the journal entry to record the cash sales?

Accepted Answer

Sales Taxes Payable = Sales * Sales Tax Rate
Sales Taxes Payable = $8,000 * 0.08 = $640 (Credit to Sales Taxes Payable)
Cash Received = Sales + Sales Taxes Payable
Cash Received = $8,000 + $640 = $8,640 (Debit to Cash)

Question 5

Furniture World is required by law to collect and remit sales taxes to the state.If Furniture World has $78,000 of cash sales that are subject to a 6% sales tax,what is the journal entry to record the cash sales?

Accepted Answer

Sales Taxes Payable = Sales * Sales Tax Rate
Sales Taxes Payable = $78,000 * 0.06 = $4,680 (Credit to Sales Taxes Payable)
Cash Received = Sales + Sales Taxes Payable
Cash Received = $78,000 + $4,680 = $82,680 (Debit to Cash)

Question 6

If a company uses a special payroll bank account:

Accepted Answer

Using a special payroll bank account means that the company draws one check for the entire payroll on the regular bank account and deposits it in the payroll bank account. It does not eliminate the need for issuing paychecks or keeping a payroll register. W-2's are still required to be issued at the end of the year. There is no requirement to use a federal depository bank for the payroll bank account.

Question 7

An employee earns $5,500 per month working for an employer.The FICA tax rate for Social Security is 6.2% of the first $118,500 of earnings each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings.The current FUTA tax rate is 0.6%,and the SUTA tax rate is 5.4%.Both unemployment taxes are applied to the first $7,000 of an employee's pay.The employee has $182 in federal income taxes withheld.The employee has voluntary deductions for health insurance of $150 and contributes $75 to a retirement plan each month.What is the amount the employer should record as payroll taxes expense for the employee for the month of January?

Accepted Answer

Payroll Tax Expense = FICA-SS Tax¹ + FICA-Medicare Tax² + FUTA Tax³ + SUTA Tax⁴ Payroll Tax Expense = $341 + $79.75 + $33 + $297 = $750.75 ¹FICA-SS Tax $5,500 × 0.062 = $341.00 ²FICA-Medicare Tax $5,500 × 0.0145 = $79.75 ³FUTA Tax $5,500 × 0.006 = $33.00 ⁴SUTA Tax $5,500 × 0.054 = $297.00

Question 8

During the first week of January,an employee works 46 hours.For this company,workers earn 150% of their regular rate for hours in excess of 40 per week.Her pay rate is $16 per hour,and her wages are subject to no deductions other than FICA Social Security,FICA Medicare,and federal income taxes.The tax rate for Social Security is 6.2% of the first $118,500 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings.The current FUTA tax rate is 0.6%,and the SUTA tax rate is 5.4%.Both unemployment taxes are applied to the first $7,000 of an employee's pay.The employee has $80 in federal income taxes withheld.
-What is the amount of this employee's net pay for the first week of January?

Accepted Answer

The answer of During the first week of January,an employee...

Question 9

On May 22,Jarrett Company borrows $7,500 from Fairmont Financing,signing a 90-day,8%,$7,500 note.What is the journal entry needed to record the payment of the note by Jarrett Company on the maturity date?

Accepted Answer

Interest Expense = Principal * Interest Rate * Time
Interest Expense = $7,500 * 0.08 * 90/360 = $150 (Debit to Interest Expense)
Cash Proceeds = Notes Payable + Interest Expense
Cash Proceeds = $7,500 + $150 = $7,650 (Credit to Cash)

Question 10

All of the following statements regarding long-term liabilities are true except?

Accepted Answer

Liabilities that do not have a fixed due date and are payable on demand are reported as current liabilities, not long-term liabilities. All other statements regarding long-term liabilities are true.

Question 11

An employee earned $4,600 in February working for an employer.The FICA tax rate for Social Security is 6.2% of the first $118,500 earned during each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings.The employee has $644 in federal income taxes withheld and has voluntary deductions for health insurance of $50 and contributes 10% of gross pay to a retirement plan each month.The employer pays the $200 remainder of the health insurance premium and an equal amount of contribution to the retirement fund.What is the amount of net pay for the employee for the month of February?

Accepted Answer

Net Pay = Gross Pay ? Federal Income Tax ? FICA ? SS Tax ? FICA ? Medicare Tax ? Health Insurance ? Retirement Plan
Net Pay = $4,600 ? $644 ? $285.20* ? $66.70** ? $50 ? ($4,600 × .10) = $3,094.10
*FICA-SS Tax $4,600 × 0.062 = $285.20
**FICA-Medicare Tax $4,600 × 0.0145 = $66.70

Question 12

The chief executive officer earns $20,000 per month.As of May 31,her gross pay was $100,000.The tax rate for Social Security is 6.2% of the first $118,500 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings.The current FUTA tax rate is 0.6%,and the SUTA tax rate is 5.4%.Both unemployment taxes are applied to the first $7,000 of an employee's pay.
-What is the amount of FICA - Medicare withheld from this employee for the month of June?

Accepted Answer

$20,000 subject to FICA-Medicare × .0145 = $290

Question 13

The chief executive officer earns $20,000 per month.As of May 31,her gross pay was $100,000.The tax rate for Social Security is 6.2% of the first $118,500 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings.The current FUTA tax rate is 0.6%,and the SUTA tax rate is 5.4%.Both unemployment taxes are applied to the first $7,000 of an employee's pay.
-What is the amount of FICA-Social Security withheld from this employee for the month of June?

Accepted Answer

$118,500 ? $100,000 = $18,500 subject to FICA-Social Security × .062 = $1,147.00

Question 14

An employee earned $4,600 in February working for an employer.Cumulative earnings of the previous pay periods are $4,800.The FICA tax rate for Social Security is 6.2% of the first $118,500 of earnings each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings.The current FUTA tax rate is 0.6%,and the SUTA tax rate is 5.4%.Both unemployment taxes are applied to the first $7,000 of an employee's pay.What is the amount the employer should record as payroll taxes expense for the month of February?

Accepted Answer

Employer Taxes = FICA Social Security + FICA Medicare + FUTA + SUTA
Employer Taxes = $285.20* + $66.70** + $13.20*** + $118.80*** = $483.90
*FICA-SS Tax $4,600 × 0.062 = $285.20
**FICA-Medicare Tax $4,600 × 0.0145 = $66.70
***Wages taxable for Unemployment = $7,000 ? $4,800 = $2,200
FUTA = $2,200 × 0.006 = $13.20; SUTA = $2,200 × .054 = $118.80

Question 15

On April 12,Hong Company agrees to accept a 60-day,10%,$4,500 note from Indigo Company to extend the due date on an overdue account.What is the journal entry that Indigo Company would make,when it records payment of the note on the maturity date? (Use 360 days a year.)

Accepted Answer

Interest Expense = Principal * Interest Rate * Time
Interest Expense = $4,500 * 0.10 * 60/360 = $75 (Debit to Interest Expense)
Cash Proceeds = Notes Payable + Interest Expense
Cash Proceeds = $4,500 + $75 = $4,575 (Credit to Cash)

Question 16

Athena Company's salaried employees earn two weeks of vacation per year.It pays $858,000 in total employee salaries for 52 weeks but its employees work only 50.Record Athena Company's weekly journal entry to record the vacation expense:

Accepted Answer

Weekly Vacation Expense = ($858,000/50 = $17,160) - ($858,000/52 = $16,500) = 660

Question 17

An employee earns $5,500 per month working for an employer.The FICA tax rate for Social Security is 6.2% of the first $118,500 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings.The current FUTA tax rate is 0.6%,and the SUTA tax rate is 5.4%.Both unemployment taxes are applied to the first $7,000 of an employee's pay.The employee has $182 in federal income taxes withheld.The employee has voluntary deductions for health insurance of $150 and contributes $75 to a retirement plan each month.What is the amount of net pay for the employee for the month of January? (Round your intermediate calculations to two decimal places.)

Accepted Answer

Net Pay = Gross Pay ? Federal Income Tax ? FICA-SS Tax ? FICA-Medicare Tax ? Health Insurance ? Retirement Plan
Net Pay = $5,500 ? $182 ? $341* ? $79.75** ? $150 ? $75 = $4,672.25
*FICA-SS Tax $5,500 * 0.062 = $341.00
**FICA-Medicare Tax $5,500 * 0.0145 = $79.75

Question 18

On May 22,Jarrett Company borrows $7,500 from Fairmont Financing,signing a 90-day,8%,$7,500 note.What is the journal entry needed to record the transaction by Jarrett Company?

Accepted Answer

The transaction represents a borrowing of money, so Jarrett Company should debit Cash for the amount received ($7,500) and credit Notes Payable for the same amount. Choice D is the only option that reflects this.

Question 19

All of the following statements regarding FICA taxes are true except:

Accepted Answer

Self-employed individuals are not exempt from FICA taxes. They are responsible for paying both the employer and employee portions of the tax, which is commonly referred to as self-employment tax.

Question 20

All of the following statements related to current liabilities for U.S.GAAP and IFRS are true except:

Accepted Answer

The statement that "Because tax regulatory systems of countries are different, the approach to recording taxes is totally different" is not true for both U.S. GAAP and IFRS. Although there may be some differences in how taxes are recorded, the approach is not “totally different”. Both frameworks require companies to account for current tax liabilities and provisions for future tax obligations.

Quiz 9: Accounting for Current Liabilities